- President Donald Trump officially announced tariffs on $US50 billion worth of Chinese goods Friday.
- Trump said more tariffs on Chinese goods could come if the Chinese government retaliates.
- Analysts warn that the move could kick of a full-blown trade war with China.
President Donald Trump officially rolled out tariffs on roughly $US50 billion worth of Chinese goods Friday and threatened further measures if the Chinese government hits back.
“In light of China’s theft of intellectual property and technology and its other unfair trade practices, the United States will implement a 25 per cent tariff on $US50 billion of goods from China that contain industrially significant technologies,” Trump said in a statement.
“This includes goods related to China’s Made in China 2025 strategic plan to dominate the emerging high-technology industries that will drive future economic growth for China, but hurt economic growth for the United States and many other countries.”
According to the US Trade Representative’s (USTR) office, the tariffs would come in two parts.
The first section will be implemented on July 6 and apply to 818 goods with a total value of $US34 billion. The second set, which includes 284 goods equal to $US16 billion worth of imports, would come later and be subject to additional public comments.
The list generally hits industrial goods rather than consumer items, according to the USTR statement.
“It generally focuses on products from industrial sectors that contribute to or benefit from the ‘Made in China 2025’ industrial policy, which include industries such as aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles,” the statement read. “The list does not include goods commonly purchased by American consumers such as cellular telephones or televisions.”
“Made in China 2025” is an important economic initiative undertaken by the Chinese government to promote the development of key industries, particularly in the tech sector, over the next seven years.
The move set off a wave of worry among trade experts, economists, and investors. Following the announcement, the Dow Jones industrial average nosedived almost 230 points, or 0.91%, as of 10: 55 a.m. ET. The S&P 500 was off around 0.65% and the tech-heavy Nasdaq composite was down just 0.33%.
Trump says more could be on the way
In addition to Friday’s tariffs, the White House is also considering an additional set of tariffs on another $US100 billion of Chinese goods. In the statement, Trump said those measures would be implemented only if the Chinese strike back at Friday’s move.
“The United States will pursue additional tariffs if China engages in retaliatory measures, such as imposing new tariffs on United States goods, services, or agricultural products; raising non-tariff barriers; or taking punitive actions against American exporters or American companies operating in China,” Trump said.
The Chinese government already promised that such retaliation is imminent. A statement from the Chinese Ministry of Commerce said that the country would implement tariffs on a similar scale on US goods.
‘A significant escalation of the trade war’
Trump’s announcement is an escalation of a long-simmering trade battle between the two countries. After some skirmishes related to washing-machine and solar-panel tariffs, Trump struck the first direct blow at China in March with the announcement of tariffs on Chinese goods.
This triggered the promise of retaliation from the Chinese and set off a series of negotiations as the two countries attempted to avoid a trade war.
After talks in Beijing and Washington, a preliminary deal was struck that appeared to put the trade restrictions on hold. But the White House announced at the end of May that the tariffs would move forward despite the deal.
Greg Valliere, chief global strategist at Horizon Investments, called the tariffs “a significant escalation of the trade war” and warned that there were four primary outcomes from the increasing tensions.
“Our take is that a trade war would bring four negatives – somewhat higher inflation; growing anxiety in the U.S. farm belt; uncertainty that could complicate long-term corporate planning; and a growing estrangement of the U.S. on the global stage.
Louis Kuijs, head of Asia economics at Oxford Economics, said that the back-and-forth trade measures would be a modest drag on economic growth, but, despite the relatively minor hit the tariffs, still make a difference.
“Such numbers still matter, and the increased uncertainty and risks will weigh on business confidence and investment, especially cross-border investment,” Kuijs wrote. “Thus, there will be an impact on growth, in China, the US and elsewhere, at a sensitive time for the global economy.”